Sunday, June 27, 2010

Stop Press: India Getting Rid of Fuel Subsidies!

I must admit that I never once thought this was achievable. Given India’s crazy domestic politics it may yet not happen. However, if local media reports are to be believed, the Indian government has taken the first constructive steps in its history as an independent nation to get rid of petrol subsidies.

The country’s oil secretary Sthanunathan Sundareshan told reporters on Friday, that not only petrol, but diesel and kerosene prices would be freed from the shackles of government price controls. What differentiates the present drive from past murmurings is that for a change the government is willing to provide figures on this occasion.

Apparently by lifting price controls, petrol prices would rise by INR3.5 (£0.05), diesel by INR2.00 and kerosene by INR3.00. Furthermore, government ministers have agreed that the market would henceforth drive the price(s).

Protests, marches, agitations, you name it - have already been planned. Everyone from the Communists to Hindu nationalists are in a strop (real or artificial), according to NDTV, an Indian news broadcaster. The commitment of the government cannot be faulted, but Indian politicians always follow short-term populist agenda where such a move would not sit well, especially as it is a coalition government that is presently running the world’s largest democracy.

Still, the move is long overdue and the need to cut the country’s budget deficit is pressing. India's fiscal deficit is forecast to hit 5.5% of GDP by 2010-11. Whether ridding the nation of fuel subsidies will play a part in cutting it remains to be seen.

© Gaurav Sharma 2010. Photo Courtesy © IndianOil Corporation Ltd.

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